U.S. dollar gains against rivals; euro drops

German retail sales fall; Spanish government raises deficit target

WilliamL. Watts

SAN FRANCISCO (MarketWatch) — The U.S. dollar rose against most rivals on Friday, with the euro slipping after weaker-than-expected German retail-sales data and disappointing news from Spain.

The ICE dollar index
DXY, +0.52%
which measures the greenback against a basket of six currencies, rose to 79.428 from 78.803 in late North American trading on Thursday. For the week, the greenback advanced 1.4%.

The euro
EURUSD, -0.7836%
fell to $1.3197 from $1.3305 in late trading in North America on Thursday and retreated 1.8% against the U.S. unit for the week.

“The retail sales number is notoriously volatile and often revised, but the results for January clearly indicate that consumers continue to keep a very tight watch on their purse strings amidst uncertainty revolving [around] the region’s sovereign debt crisis,” said Boris Schlossberg, director of currency research at GFT.

“The news does not bode well for German growth in the first quarter of this year, indicating that the country may remain in economic contraction unless domestic demand improves markedly,” he said.

The euro was vulnerable to losses after failing to overcome resistance at the $1.35 level earlier this week, he said.

Investors also digested a string of bad news from Spain, where economic data showed an increase in jobless claims in February. In addition, the Spanish government raised its budget deficit target to 5.8% of gross domestic product for 2012, compared with a previous target of 4.4%.

“The debt crisis is by no means over given the negative growth/budget deficit dynamics in play, but the LTROs appear to have bought the euro zone some time as Spain and Italy 10-year yields remain below 5%,” said strategists at Brown Brothers Harriman & Co. in a note, referring to the European Central Bank’s long-term refinancing operations.

The euro’s weakness against the dollar in the wake of LTROs this week is predictable as a similar trend was witnessed after ECB’s operations in December, according to a report from GFT.

The British pound
GBPUSD, -0.4752%
slipped to $1.5826 from $1.5954 although the pound/dollar pair posted a weekly gain of 0.3%.

The dollar
USDJPY, +0.15%
bought 81.81 Japanese yen, up from ¥81.12 late Thursday. The buck strengthened about 1% against the yen during the week.

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